Debt Collection Law

Debt collection in Michigan is relatively procedurally straightforward, but it requires creativity so as to locate and seize assets.  The following stages are common when it comes to engaging in debt collection:

1.  Obtaining a Money Judgment

If a debtor owes money to a creditor, then the debt needs to be turned into a money judgment by way of filing suit against them.  If a non-Michigan court issued a money judgment and the judgment-debtor has assets in Michigan, then the foreign judgment needs to be domesticated in Michigan before debt collection can begin.  A foreign judgment can be domesticated by way of SCAO MC 62.

A judgment-debtor may be permitted by a judge to make installment payments towards the judgment, but if the installment payments are not made as ordered, the judgment-creditor can seek for the order permitting installment payments to be set aside by using SCAO MC 16 and SCAO MC 16a.

2.  Locating Assets

After a money judgment is issued which permits debt collection to occur, the judgment-debtor's assets must be located so they can be seized.  This can be done by way of reviewing social media accounts (i.e., LinkedIn, Facebook, etc) to ascertain where they work, by performing cursory Internet searches, by utilizing private investigators, or by conducting a creditor's examination.  A creditor's examination, which is done by way of a subpoena (SCAO MC 11), compels the judgment-debtor to testify about their assetsand if they do not show up to testify, a warrant for their arrest can be requested from the judge.

3.  Garnishments, Liens, and Writs of Execution

A periodic garnishment can be sent to the employer of the judgment-debtor (SCAO MC 12), and a non-periodic garnishment can be sent to the bank of the judgment-debtor (SCAO MC 13).  If the garnishee-defendant (i.e., the bank or employer of the judgment-debtor) does not honor the garnishment, then the garnishee-defendant can become liable for the judgment-debtor's debt.

Between November 1 and December 31 of each year, the Michigan Treasury can be sent a writ of garnishment so that the judgment-creditor can intercept the judgment-debtor's tax refund and tax credits (SCAO MC 52).

Other than seeking assets from the garnishee-defendants, the judgment-creditor can also utilize written discovery requests to learn from the garnishee-defendants as to where else the judgment-debtor may have assets which can be garnished.

For businesses that owe money, writs of execution can be utilized (SCAO MC 19) whereby a court officer seizes assets and sells them at auction to satisfy the judgment.

4.  Fraudulent Transfers of Property

If the judgment-debtor fraudulently conveys assets to a third-party so as to try to avoid paying the money the judgment-debtor owes, the third-party can be sued by the judgment-creditor by way of the Michigan Uniform Voidable Transactions Act, MCL 566.31, et seq.  If a house is sold by the judgment-debtor to a third-party despite a judgment lien having been recorded with the applicable register of deeds, then a motion can be filed by the judgment-creditor to set aside the sale.

5.  Renewal of Judgment

A money judgment is valid for ten (10) years in Michigan, but the judgment-creditor can seek for the period of time to collect the money owed to be extended so long as a motion for the same is filed by the judgment-creditor before the judgment expires.  See MCL 600.2903 and MCL 600.5809.